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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






2. AVC = TVC/Q






3. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






4. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






5. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






6. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






7. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






8. AFC = TFC/Q






9. Entry of new firms shifts the cost curves for all firms downward






10. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






11. Total product divided by labor employed. APL = TPL/L






12. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






13. Ei > 1






14. Costs that change with the level of output. If output is zero - so are TVCs.






15. Ed < 1






16. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






17. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






18. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






19. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






20. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






21. A good for which higher income decreases demand






22. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






23. Es = (%dQs) / (%dPrice)






24. Product demand - productivity - prices of other resources - and complementary resources






25. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






26. Entry (or exit) of firms does not shift the cost curves of firms in the industry






27. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






28. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






29. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






30. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






31. The total quantity - or total output of a good produced at each quantity of labor employed






32. MUx / Px = MUy/Py or MUx/MUy = Px/Py






33. Ed = 0 - no response to price change






34. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






35. Exists if a producer can produce a good at lower opportunity cost than all other producers






36. Exists if a producer can produce more of a good than all other producers






37. Exists at the point where the quantity supplied equals the quantity demanded






38. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






39. The additional benefit received from the consumption of the next unit of a good or service






40. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






41. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






42. The rational decision maker chooses an action if MB = MC






43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






44. The change in quantity demanded resulting from a change in the price of one good relative to other goods






45. The difference between total revenue and total explicit and implicit costs






46. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






47. The ability to set the price above the perfectly competitive level






48. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






49. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






50. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.